The appeals court in San Francisco said a lower court erred when it threw out claims by Beech-Nut, a unit of Kraft Foods Inc., that Gerber routinely underbid for contracts to supply jarred baby food and cereals to a welfare program for low-income mothers.

By securing contracts with the Women, Infant and Children, or WIC, program through below-cost bids, Gerber, a unit of Swiss firm Novartis, maintained 70% to 86% of the infant cereal and jarred baby food market, Beech-Nut claimed in a 2001 lawsuit.

The court ruled that Beech-Nut's lawsuit should be allowed to continue because it "alleges a theory of predatory pricing" and because "it sufficiently puts Gerber on notice of the claims against it."

According to the WIC Web site, Congress appropriated $4.39 billion for the program in 2002. Beech-Nut claims that Gerber's WIC monopoly has caused Beech-Nut to lose distribution in California and has shut out its products in Texas.